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Strategic retrenchment can help firms grow stronger in global markets, new study shows

A study in the Strategic Management Journal finds that international firms that strategically withdraw from certain markets may be better positioned to grow and compete more effectively in others. The research highlights how focusing on core markets—rather than spreading resources too thin—can strengthen long-term performance.

The study, conducted by Chunhu Jeon (Morgan State University), Jonathan Bundy (Arizona State University), and Wei Shen (Arizona State University), analyzed 18 years of data from Korean multinational firms to explore how ranking systems and tiered status influence corporate behavior. Their findings suggest that organizations respond not only to where they are ranked overall but to where they stand within ranking tiers—especially near tier boundaries.

Companies near the top of their tier often take bold actions to move up into the next tier, while those near the bottom behave more cautiously, seeking to avoid slipping down. This dynamic has important implications for how firms compete, grow, and allocate their resources.

"Our study shows that firms are highly sensitive to their relative position within rank tiers," said Bundy. "When firms are close to jumping up—or falling down—a tier, that tension shapes their strategic decisions in measurable ways."

One of the most significant findings is what the researchers term the "tier-aspiration effect." Firms at the top of a tier are more likely to engage in ambitious and sometimes risky acquisitions in an effort to break into the next highest group. In contrast, the "tier-maintenance effect" describes how firms near the bottom of their tier act more conservatively to maintain their current status, often avoiding risky moves unless pressured by competitors from lower tiers.

By examining acquisition patterns and asset-based rankings from 2001 to 2018, the study offers a new lens through which to understand competitive behavior in tiered environments, such as Fortune rankings or law school classifications.

The researchers argue that these behaviors are not driven solely by rational calculations of cost and benefit, but also by perceptions of status and the psychological impact of being near a boundary.

"Organizations don't just care about being ranked high," said Jeon. "They care about what that ranking means in the eyes of others—clients, partners, investors—and how close they are to moving up or down."

The study contributes to a growing body of work on how rankings influence decision-making, strategy, and competition. It also has practical implications for business leaders, suggesting that attention to status dynamics within tiers can help predict competitor behavior and guide more effective strategic planning.